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Guest editorial Monday 5 November 2012: 'Breaking up is hard to do' - reflections on South London's tripartite future

This guest editorial from Irwin Brown of the Socialist Health Association examines the draft recommendations of the Trust Special Administrator on the future of South London Healthcare NHS Trust.

South London – more of the same
According to the Public Accounts Committee, there are over 70 NHS Trusts which had deficits last year and at least 11 existing Foundation Trusts (once the elite) that are not viable.

Top of the list of debtors, although not by much, is South London Healthcare Trust (SLHT).  Proposals to make services sustainable in South East London have been published by the Trust Special Administrator who drew on external consultancy advice from the usual experts.

Over recent years, in many of the 70 challenged trusts and others, there have been proposals drawn up by similar experts; proposals then signed off by experts in the strategic health authorities or even the DH.  South London has had two previous attempts in recent years calling in turnaround experts but the proposals made were not implemented.

The fallacies of expert predictions
A feature of all this work to “turnaround” challenged acute trusts is how wrong the expert’s assumptions turn out to be.  This is also most of the PFI problem; where lovely new hospitals were to be paid for out of an income stream driven by rising demand and a payment by results tariff going up faster than inflation.

Reasonable, if optimist assumptions at the time, turn out to be disastrously wrong as policy shifts to tariff deflation and demand management - made worse by “expert” advice over transferring risk through the contracts turning out to be wrong.

Anyway, what is known is that SLHT has serious financial difficulties – and has had for years.  This financial year, it will have a deficit of over £60m which can be argued to be an unfair subsidy to an inefficient system.

The experts have projected that based on all the information collected, including the intentions of the commissioners, the trust in its current form will be running a deficit of almost £80m in 2015/16, even if it delivers on an extensive cost reduction programme.  

The power of three
We know the Trust was formed in 2009 as a merger of three smaller trusts, and it operates over three main hospital sites (one of which has become a health campus), but little if any benefit has resulted from the merger.

Two of these three sites have PFI buildings which are included in the list the DH proposes (subject to certain conditions) to subsidise to allow for the costs over and above those which would have been expected from a public sector solution. This is ironic, as the PFIs were justified by the experts up to and including at DH as being better value for money than public sector comparators.

The experts have used benchmarking of the various categories of expenditure to demonstrate that “efficiency” in SLHT is poor. They take all this as a demonstration that the leadership is poor and that the management is unable to drive through the changes to make SLHT sustainable in its present form. A more rational analysis of the general problems faced by many trusts in a similar position was set out by Mike Farrar of the NHS Confederation - finding that the root causes are systemic, and that simplistically blaming poor management or PFI costs is unhelpful.

Despite the poor finances, the trust's general clinical performance is good, with below-average mortality rates - and performance against access targets, which were poor, have been improving. Nobody is claiming there is a clinical case for drastic intervention.  

Lame and unexciting solution
The solution advocated by the Special Prosecutor is actually a bit lame and unexciting.  Historic debts (over £200m and rising) are to be written off; the two major PFIs are to be subsidised for the rest of the contract terms (over £20m a year); some minor bits of estate are to be sold off. The trust is to be broken into its three old parts, and each part is to be transferred to an existing organisation where the required efficiencies will be delivered by their superior management.

There is no service reconfiguration, as pretty much the same services will be delivered in the same way from the same sites but more efficiently.

There is a bit of window dressing around the margins, looking at the wider South East London health economy. There is to be a Community Based Care Strategy, with many laudable aims.  The “health campus” idea will be developed.

The A&E department at nearby Lewisham Hospital is to be closed (which was tried a few years ago).  And there is a proposal for an elective centre for non-complex inpatient procedures also at Lewisham.

Apart from the last item, which is more of an idea than a worked up business case, this is marginal stuff.

The more significant benefits come from “efficiencies” and mostly from job losses – perhaps between 500 and 750 jobs, and outsourcing. Estimates for what efficiency gains are possible comes from a well-known argument deployed by management consultancies which says 'if you have good management then they can bring costs down to the level the best trusts already achieve' – it’s the everyone must be above average argument.

Benefits realisation is left to management in other trusts who will take over bits of SLHT. Of course, that idea implies that these rescuing bodies are themselves well-managed and sustainable; except the FT landscape is littered with organisations that were once hailed as exemplars and are now in serious trouble.

There is little to justify the dramatic step of breaking up the trust, and less to give confidence this set of solutions will be any easier to implement and any more sustainable than previous attempts. It is also unclear how such a complex and lengthy programme of change will be managed when there are no longer any bodies with strategic authority.